Price changes during the 1920s are shown in Figure 2. Real total GNP fell 10.2 percent from 1929 to 1930 while real GNP per capita fell 11.5 percent from 1929 to 1930. The initial downturn was relatively mild but the contraction accelerated after the crash of the stock market at the end of October. The Great Depression began in the summer of 1929, possibly as early as June. Though the Model T’s market share was declining after 1924, in 1926 Ford’s Model T still made up nearly 40 percent of all the new cars produced and sold in the United States. ![]() The 1927 recession was also associated with Henry Ford’s shut-down of all his factories for six months in order to changeover from the Model T to the new Model A automobile. There was a very mild recession in 1924 and another mild recession in 1927 both of which may be related to oil price shocks (McMillin and Parker, 1994). ![]() From 1923 through 1929 growth was much smoother. As will be discussed below, the Federal Reserve System’s monetary policy was a major factor in initiating the 1920-1921 depression. In mid-1920 the American economy began to contract and the 1920-1921 depression lasted about a year, but a rapid recovery reestablished full-employment by 1923. There were several interruptions to this growth. By both nineteenth and twentieth century standards these were relatively rapid rates of real economic growth and they would be considered rapid even today. (Historical Statistics of the United States, or HSUS, 1976) Real GNP per capita grew 2.7 percent per year between 19. Real GNP growth during the 1920s was relatively rapid, 4.2 percent a year from 1920 to 1929 according to the most widely used estimates. We begin the survey of the 1920s with an examination of the overall production in the economy, GNP, the most comprehensive measure of aggregate economic activity. These things make the 1920s a period of considerable importance independent of what happened in the 1930s. The Federal Reserve System first tested its powers and the United States moved to a dominant position in international trade and global business. The period saw major innovations in business organization and manufacturing technology. Recreational activities such as traveling, going to movies, and professional sports became major businesses. The introduction of the radio, radio stations, and commercial radio networks began to break up rural isolation, as did the expansion of local and long-distance telephone communications. The rapidly expanding electric utility networks led to new consumer appliances and new types of lighting and heating for homes and businesses. ![]() The demands of trucks and cars led to a rapid growth in the construction of all-weather surfaced roads to facilitate their movement. The flexibility of car access changed this and the growth of suburbs began to accelerate. Though suburbs had been growing since the late nineteenth century their growth had been tied to rail or trolley access and this was limited to the largest cities. There is a rapid adoption of the automobile to the detriment of passenger rail travel. It marks the first truly modern decade and dramatic economic developments are found in those years. This is unfortunate because the 1920s are a period of vigorous, vital economic growth. However, with all of this concern about the growing and developing role of government in economic activity in the 1930s, the decade of the 1920s often tends to get overlooked. Economists and historians have rightly given much attention to that decade. The decade of the 1930s marks the most severe depression in our history and ushered in sweeping changes in the role of government. ![]() The interwar period in the United States, and in the rest of the world, is a most interesting era. Gene Smiley, Marquette University Introduction
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